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Comment by AceJohnny2 | Hacker News Reader

The french pension reform attempts have been going on for decades. I remember in the mid-90s a huge, weeks- (months-?) long public transit strike which, funnily enough, kick-started Parisian's interest in roller-blading (and led to the awesome weekly Friday-night roller-blading tour [1]. If it's your thing, I highly recommend it! But be prepared to have to go over some cobblestone sections)

France's system has the working population pay for the pension on the retirees, as a social security tax. With the retirement age around 62-65, with the lifespan increasing, and with the Baby Boomers retiring, it isn't a sustainable system.

Every president, be they socialist or liberal, have attempted to tackle the issue, only to get country-paralyzing backlash. People will nitpick the details of whatever current plan proposes, but the fundamental problem remains.

[1] https://pari-roller.com

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the system IS sustained. the main white collar one even generates profits. increase the salaries that will increase money being sent to retirement funds and it won’t be a problem anymore. france income per capita has been the same for the past 20 years. they are stealing our wages to make us slaves and they blame us for not working enough.

christine lagarde pushed for blocking wage rise in the EU, european commission non elected leaders are pushing for it too. salaries for blue collar in france are becoming those of much poorer countries and in a globalised world where most of the goods are made in countries where salaries are rising as well as inflation, blocking our wages is only sending us to the third world .

it is nothing else than a betrayal at the highest level of the state

By increasing everybody's salaries, it seems likely to me the cost of goods and services would go up by virtue of inflation. There is no free lunch. At the same time, prosperity is not a zero sum game. The rise of China has coincided with increased living standards in nearly every country. I'm not sure who would be "stealing" your wages. If I were to say, it's French labor policies that are stifling innovation and productivity, and it's manifesting in a decrease in living standards. I once met a couple French businessmen in a bar, both in the tech space. They bemoaned how difficult it was to fire anybody in France, meaning they worked very hard to not hire people to begin with. They were also in the US specifically to look for investment opportunities. This is the kind of thing that's choking France.

> By increasing everybody's salaries, it seems likely to me the cost of goods and services would go up by virtue of inflation.

But then everybody's salary stagnating hasn't made the cost of goods stagnate. There's no such simple and direct link between the two.

>But then everybody's salary stagnating hasn't made the cost of goods stagnate

Because Apple, Tesla and the international market for fungible goods like gas or grain, doesn't care about the stagnating salary in your country. They'll still want X USD for their products.

Maybe the cost of imported goods has gone up

It has, partly. But a part of the inflation at least in France/Europe is also due to big corp choosing to increase prices because they can (since "there is inflation"). For example Unilever has distributed very high dividends (€19B, for a total turnover of €80B, that's almost a quarter of their total revenue going directly towards to their shareholders while their workers and consumers see nothing), while the numerous products the company sells (which are mostly daily usage food and sanitary products) have seen their prices skyrocket "because of the inflation".

Then France should not have allowed Unilever to merge so much, or at least guaranteed competition in France. If this works, they must have had either state support or a monopoly position.

Why? Why is this an axiom?

Example: supermarkets where I live co-ordinate their prices. There are 5 big chains and they all increased prices in tandem (and margins, so nothing to do with increased costs). They get slapped with a 100 miliion euro fine every year or two, but what do they care? It's a drop compared to the amount they profit from the cartelisation.

Time and time again it’s the same bullshit argument. I’ve grown tired of it. The price of goods and services has decoupled from the cost for a while now, and prices are rising at a staggering rate without salary increases.

>The price of goods and services has decoupled from the cost for a while now, and prices are rising at a staggering rate without salary increases.

Almost as if there's multiple supply chain disruptions (from pandemic to ukraine) causing goods to be more scarce, causing consumers to bid up the prices for the goods that remain.

No. This has been the stated reason, but profits are at a record level. Inflation may be the reason for an initial rising of prices, but they do not return to old levels when costs go back down.

yeah, that’s not why this is happening

> the US COVID-19 inflation is predominantly a sellers’ inflation that derives from microeconomic origins, namely the ability of firms with market power to hike prices.

https://scholarworks.umass.edu/econ_workingpaper/343/

Sounds like an excellent opportunity to start selling goods and services.

Where is an average person going to get the capital to start telling goods and services?

Average business loans in the euro area are around 4% as of December 2022, though governments are still raising rates. As long as these unreasonable profit margins are higher, it would make sense to get one, and I'm not sure anything under 15% profit (much higher than current govt bond rates) could be considered unreasonable. I started manufacturing candles during the pandemic with only a few thousand dollars up front and those things can get 50% margins which is insane.

I understand that monopolies and barriers to entry can exist. The government should be much more focused on eliminating those rather than central planning through things like pensions that are shockingly complex and have a penchant for unintended consequences. I believe in a social safety net but markets with a little guidance can do most of the government's work for it and avoid be better at avoiding a ton of pitfalls like runaway inflation.

Has demand risen faster than supply?

No. It‘s greed.

In case that's not sarcasm, I'm in the lumber business. Lumber prices have collapsed in the last six months with massive losses and curtailments throughout the industry. I assure you there is no less greed today than there was a year ago when the market was at the top -- and no more greed then than now. We always at all times charge precisely as much as the market will bear. We do that by always selling to the highest bidder, and I have no idea how else we'd do it.

yeah most of our goods and food are now imported so it is not even local salaries that will increase the price of goods. container shipping price however…

> and in a globalised world where most of the goods are made in countries where salaries are rising as well as inflation, blocking our wages is only sending us to the third world .

Just throwing this out here, but in a globalized world, by what mechanism would one expect Europeans and Americans will be able to enjoy a greater standard of living than people in, say, Asia?

Are they somehow smarter? More productive? In control of more natural resources? If not, why would you expect that the first-third world gap to not continue to normalize?

its normalizing but for the worst in developed economies. housing is now out of reach while decades ago a blue collar salary was enough,to own a house.(in the USA you can still get six digits blue collar jobs that lift you out of poverty and give you access to housing. in france that is merely a dream or a netflix show) today already for many qualified workers (tech for instance) staying in india vs coming to france is better (there are other factors like healthcare or other that are at play but in pure economic power it would just be better to have a good it job in india vs europe) that was definitly not the case 20 even 10 years ago.

Six figure blue collar jobs are not super common in the US.

It's not super common but it definitely is a thing...

Definitely one of those "it depends" situations. For instance, you could be illiterate middle school drop-out and pretty easily make very close if not six figures if you worked near minimum wage canning work all year in Alaska or something by working the season of every available catch (16 hours a day lots of OT). And you'd bank all your post-tax earnings as they provide the housing/food normally too.

You may work yourself to the bone but pretty much anybody in the US can make a killing.

"Just move to one of the most remote and inhabitable places in the world, work twice as much as average, and you too can join the middle class"

when I did it they paid for my flight, my housing, and my food... qualifications were homeless off the streets of seattle and I-9 (but lol, e-verify is not mandatory in alaska so as you can imagine such requirement was easily bypassed by anyone who wished). There is no real 'moving' process other than getting on the plane, everything is there.

when you're working 16 hours a day 7 days a week you don't really notice much outside of the factory floor anyway. Whether it was remote or in Manhattan you wouldn't feel the difference as you do nothing but work. I was working ~112 hours a week when I was in Alaska.

This is exactly how America became America.

Except for the mainland of America has things like warm weather and days of uniform length

Sure.

And the settlers nearly starved the first few winters in every colony despite that.

It was also a big, dangerous wilderness when Europeans first arrived. It wasn't a place you could just go travel to, get a nice cushy job, buy a nice house, and live a comfortable life.

It had land, free[1] for the taking.

And in pre-industrial times, when 70% of the population were farmers, land was a direct, and immediate proxy for wealth. Wealth that stayed with you and your family. You were the owner, instead of some shitty sharecropper for a landlord.

[1] I mean, aside from the natives.

From the European point-of-view, the presence of the natives was yet another big danger and obstacle, in addition to the harsh weather (the winters in the northeast where the first colonies were established are much worse than in most of Europe), lack of infrastructure, etc.

As for land being a proxy for wealth that stayed with you, that worked out OK as long as there was lots of land for people to grab up and claim as their own (or take from some natives who don't have the weapons technology to fight back well). And it's the reason people colonized North America: because all the land in Europe had been claimed by some shitty landlord. These days, that's all gone: now you're stuck living with a shitty landlord again, and there's no new continents left to colonize, so we need to come up with a better economic system.

Do you think frontier and settler life was easy and comfortable?

I think that this is a silly comparison for a variety of reasons, including the weather

Is 40 hours a week of overtime available at canning jobs?

Isn’t it pretty stabdars to make 100k plus as a plumber ?

Knowing a few plumbers, I'm sure it can be, but it can be a very feast or famine trade. And most that make that own their own business, so still blue collar, but not exactly an everyman kind of job.

I think that is the norm for plumbers servicing areas with 1m+ homes. Granted that likely means they have a long commute even with that salary.

I've been pondering this exact point for a while. I think we are seeing Western economies regressing to the mean, it's a long term trend. I'm not happy about it, but I can't claim it's not fair.

> I can't claim it's not fair.

Fair to whom? Why should middle class in the West vote to allow outsourcing to cheaper countries? That will just destroy their well-paying jobs in exchange for some cheap Chinese goods and Indian call centers.

I also feel the same way about current "remote first" trend - American software engineers are shooting themselves in the foot by embracing remote work. Wait until your salaries get normalized to Brazil or Indian levels. Anecdotally, my company had multiple rounds of layoffs and has started hiring all the backfills in the third world now.

> Why should middle class in the West vote to allow outsourcing to cheaper countries?

Because you can run but you can't hide. If you institute protectionist policies, you will in turn become less competitive. Hence, you will require even more protectionist policies, that in turn will make you even more uncompetitive. In the end, you will have higher prices for lower quality domestic products.

I don't like gravity, but it doesn't mean I can ignore it and jump from tall buildings. While economics is not an exact science (probably not even a science), you cannot ignore its principles.

If protectionist policies worked, we would have figured out by now. The truth is that limited protectionist policies might work to give a push to a nascent industry in the short to medium term. But it does hurt the country as a whole in the long term.

> If you institute protectionist policies, you will in turn become less competitive

less competitive against whom? If West had not shipped its factories to China, I am sure West would have still stayed competitive against China by miles. In fact, by shipping its technical know-how for manufacturing, West has allowed China to become more competitive.

> I don't like gravity, but it doesn't mean I can ignore it and jump from tall buildings.

Sure, but outsourcing is nothing like gravity. It is a mixture of greed on part of corporations to reduce labor costs, naivete on behalf of politicians who thought China and others would welcome Western values along with Western jobs and stupidity on part of voters who traded short term cheap junk for long term stable jobs.

In the 1960s, US auto-makers appeared content to make crappy, unreliable cars until Japanese imports (also crappy at first) came in and improved quickly, putting pressure on the domestics to also improve.

Consumers have vastly benefited from that competition, far in excess of any losses from the domestic automaker labor group.

It’s not entirely voluntary, but if you want to see what protectionism and economic isolation will bring, go visit Cuba. Then hop over to Grand Cayman, Grand Bahama, or Puerto Rico to see what being more integrated but competitive has to offer.

If Japan had completely decimated Western car markets, had conflicting values with the US and posed a geopolitical rivalry, I would still have preferred crappy cars for the Western societies. After all, West didn't strengthen USSR via trade when there was a cold war.

Also, if the long term cost is "Western lifestyle regressing to mean" (original context I replied to), I'd still prefer crappy cars to preserve well-paying jobs.

My belief is that "isolationist economies fall well below the mean" in the long-term. If you want a comfortable Western lifestyle, you don't want to isolate yourself from global trade, but global trade means you aren't isolated from global competitive pressures.

> if you want to see what protectionism and economic isolation will bring, go visit Cuba

Hasn't its neighbour and biggest economy in the world been levying an embargo on Cuba for over half a century? Doesn't seem like the appropriate example for your argument.

It's exactly a (forced as a political matter) economic isolation situation. North Korea is another politically isolated economy. I don't think they're doing very well either.

Trade helps poorer nations more than it helps richer nations, but it helps both.

There are billions of people living under worse regimes than Cuba, yet only it and a handful of other nations have been on the receiving end of US sanctions. This was devastating to its economy (prior to the revolution it was of course Cuba's biggest trading partner).

There is no justification for the embargo. It was Cold War aggression, pure and simple, now sustained for the last decades purely because of electoral reasons.

I completely agree politically, assuming Cuba is no longer willing to host missiles or other non-defensive military apparatus from an adversarial nation.

Like Turkey hosted our missiles to hit Russia? No, sorry, I forgot, that's okay because we are good and they are bad.

>Sure, but outsourcing is nothing like gravity. It is a mixture of greed on part of corporations to reduce labor costs, naivete on behalf of politicians who thought China and others would welcome Western values along with Western jobs and stupidity on part of voters who traded short term cheap junk for long term stable jobs.

Agreed. Fundamentally, if you want to institute protectionist policies for labour, you also need capital controls to prevent all your businesses from exporting their operations to avoid these policies.

The Western standard of living has only been possible through currency/sage suppression of the non-Western world. Why do you think relocating everything to the West would be feasible or solve anything?

I don’t understand why this isn’t common sense.

> some cheap Chinese goods and Indian call centers

Then again, if you have such a naive view of globalisation, you probably need to read more.

> Why do you think relocating everything to the West would be feasible or solve anything?

> a naive view of globalisation

I am talking about jobs in Western societies which were relocated elsewhere. And I admit that my views might be naive. But it is on you to convince Western middle class that shipping their jobs overseas, without an equally good job or social safety net lined up, is actually better for them. If you are just going to move jobs in the name of efficiency and let the Western labor rot and fend for itself, you are going to get Trump, Le Pen, AfD and Brexit.

In this whole thread, I still haven't seen a compelling case about how getting some goods cheaper / better is a worthy tradeoff to moving my stable job overseas.

I’m not trying to convince you or anyone, nor do I have any reason to.

I’m just talking about reality - where Western governments, companies, and manufacturers decided that profit trumps employment. At the same time, without cheaper goods, given wage stagnation, consumers couldn’t have afforded local goods anyways.

It’s quite complicated really, and I don’t see a solution in capitalism.

Most Westerners never think about why exactly their standard of living is much higher than the global average. The implicit assumption is that that's just the way things are and will always be.

It’s really eye opening how big the gap is not just in labor costs but also perishable goods.

When I was in morocco 10 years ago one of the buckles for my motorcycle pants suspenders broke. I was able to get a local leather worker to create a pattern from the broken piece, craft the replacement, and integrate it into my suspenders overnight for under 5 USD. This was arranged by the hotel I was staying at, and wasn’t some special inside knowledge on my part.

The mass manufactured replacement were more than 10x that cost, and made of lower quality materials.

Morocco is not a rich country, but a lot of the world is even less wealthy.

You're only looking at that from a consumer perspective. On the other side of that transaction is a person earning only $5 for several hours of labor minus the cost of materials.

And there's not much meat on that bone to redistribute to the elderly.

Such “normalization” would then also, presumably, apply to the rich. Unless one thinks that a billionaire who makes ten million USD a day is ten thousand times more productive than even a very high-earning wage worker.

But are the ten thousand people he employs getting good wages because of his actions? Would they be making comparable salaries if he had not started his companies? He is not paid for productivity, he is rewarded for taking the initial risk and investing his own money.

I think this story/abstraction of "owning money" has to break at some level.

I mean if you believe, as I do, that money (especially at trillion level) is direct substitution for power over people and even whole societies then what happens if we let this global game of Monopoly to play to its seemingly inevitable conclusion ?

Isn't this somehow antidemocratic in nature?

And if you notice that inheritance is not unlike inheriting stance in aristocratic societies this capitalistic abstraction of ownership through money seems to crack.

Most billionaires don't really have access to the cash that is included in their net worth, they are shares in their company. If they want to be liquid they have to sell the shares, sacrificing their control of their companies.

Regarding the rich having an outsized influence in politics, I do agree, but I think the solution is to get rid of PAC's. Give the rich the same donation limits as everyone else. Strict legal enforcement should be put in place.

I believe if you set a limit on an individuals net worth, the economy will lose one of its major drivers and job creators will potentially just hit that net worth, shrug and shut their companies down or pass them on to less capable people costing millions of jobs. Depending on the net worth cap, this could happen relatively early in a companies growth.

I do strongly agree with a strong inheritance tax for individuals over an arbitrary net worth, something in the hundred millions range.

>> I believe if you set a limit on an individuals net worth, the economy will lose one of its major drivers and job creators

This is a really intresting intuition. My off the cuff resposne would be something like this:

So what? This does not mean anything without understanding what is the social impact of the jobs that were created - I have a bit of doubt that all 80000+ jobs at Facebook is really a net benefit for a world as a whole.

I'm from former Eastern Block country which went through full blown comunism era and we really did not need billioners to help create unlimited amount of bullshit jobs.

And what is more important for me, as I'm in the process of going through Shirer The Rise and Fall of Third Reich, and it had a real impact on my understanding of democracy - I believe at this point that it is paramount to create system in which no single individual or party has the ability to accumulate infinite power, no matter what cost it bears for economy. If anyone have some reservations - find the part where the infamous German "leader" explains to his generals why the war with west is inevitable and why it has to happen now and not in next few years.

I hear what you are saying but who in the US from the private sector is close to seizing power? Elon Musk is the richest man in the world and a political pariah. There is a big difference between 80k jobs created by the government and 80k jobs created by the free market.

Those 80,000 jobs may not have a social impact as far as moving the world in the a desired direction but what jobs do?

Does a plumber? A teacher? What if they are not teaching what the party in charge wants taught?

Are we going to put someone in charge of determining if a job has meaning and eradicate the job if they don't? What happens when a different political party wins election and starts eliminating positions that the prior party thought had meaning? Can we say certain political parties have no net world benefit and remove them from contention?

That much power in government hands is a slow march back to the communism from which your country escaped.

Hitler was able to do what he did because the government had so much power. Less power in the hands of the government prevents that, not giving the government more power to police who can earn how much money and what jobs are worthy of existing.

I understand what you are saying especially when taken in the context of your childhood but I just disagree with giving anyone the power to enforce it.

>> There is a big difference between 80k jobs created by the government and 80k jobs created by the free market.

So let's start with the obvious - I was not trying to propose "big government" as a solution here, sorry if this was not clear enough - I completly agree that using government as a substitution for private ownership mostly does not work.

My main point was "power accumulation" in hands of few or even one. Elon Musk is good example here - his accumulated wealth give him real power to decide what life of thouseds of people will look like (for better or worse). You may claim that this is not politcal power, but it still is power nontheless. And thus lifes of thousends wages on his mental state which at any moment can go full Caligula. I know this will sound idealistic .. but I do not like to live in a society where we leave so much power in hands of one individual. This also applies to politicians.

I know trying to solve this problem will probably throttle economic development but as lord Farquaad said "it's a Sacrifice I am Willing to Make" :).

>>Those 80,000 jobs may not have a social impact as far as moving the world in the a desired direction but what jobs do? >>Does a plumber? A teacher? What if they are not teaching what the party in charge wants taught?

This sounds a bit nihilistic - extrapolating this line of though leads quite easyly to conclusion that nothing matters (and as Camus has written we are then only left with one important question to answer).

>> Are we going to put someone in charge of determining if a job has meaning and eradicate the job if they don't?

Aren't we already doing it with capitalism and statism? :) Or did I missed ChatGPT-XXX taking over the world already (I swear I was trying to pay attention :))? But in all seriousness - I only propose limiting power of individualsm institutions and corporatios, not giving it to government.

>> What happens when a different political party wins election and starts eliminating positions that the prior party thought had meaning?

And what do you think happes when new CEO takes over company? Because I have seen far worse cleanings done through corporations that were taken over by competition than the biggest governments cleanigs of institutions done by new party taking over government (I happen to have some inside access to local govermants organizational data and know some people that worked for big companies that were raided).

>> Hitler was able to do what he did because the government had so much power.

Still the underling problem is power accumulation - governmant from my point of view was only means to obtaining it. I believe that we are living in times when new doors opened for power accumulation that will grant some individuals almost comparable power. And I would gladly sacrifice parts of economic development potential to do that.

> If they want to be liquid they have to sell the shares, sacrificing their control of their companies.

Of course they don't, they just take loans against their assets. The banking sector is happy to provide them with liquidity at almost no cost.

> Isn't this somehow antidemocratic in nature?

The idea of joint-stock companies is antidemocratic in nature. If you were to propose that people could buy votes in parliament, everybody would (rightly) be outraged. But this is how joint-stock companies work: workers have 0 say in how things are run and how resources are allocated, owners can buy and sell voting rights and dividend rights.

Just throwing this out here, but in a globalized world, by what mechanism would one expect Europeans and Americans will be able to enjoy a greater standard of living than people in, say, Asia?

The world standard of living should be equalized globally but it should be the present first world standard, not the present third world standard.

This is certainly possible given increasing world productive capacities.

The present first-world standard is enabled in large part by the present spread in costs of production (roughly: wages) in other areas.

Certainly the phone you’re using and almost certainly the clothes you’re wearing were not made by people making a median Western wage.

> More productive?

Yes. Capital let's you be more productive. Rest of the world is building up capital to increase productivity, but is also increasing demand. Resource limits are blips on the market.

> In control of more natural resources?

I mean… yeah. That's not really related to the thread's topic, though.

> why would you expect that the first-third world gap to not continue to normalize?

I don't think that's the criticism. "Blocking our wages" probably isn't increasing the wealth of the people in Cold War non-aligned countries: is the money going to them, somehow? The direct effect is that employers (= the people who would be paying the extra wages) don't have to spend as much money paying their employees. What knock-on effects would lead to that improving things for people?

Lots of Asian countries have a high standard of living too.

One of the biggest differences is functioning institutions. As bad as some first world governments can seem from our perspective, they’re way better than the kleptocrats and warlords who rule some parts of the world. And yeah, when you have functioning institutions, you do end up with smarter and more productive populations because children can go to school instead of slaving away in the cobalt mines.

well, we _do_ have a head start and stable (post?)industrial societies with mechanisms already set in place.

> why would you expect that the first-third world gap to not continue to normalize?

If the third world raises to the first world standards, then great. If that process involves first world standards falling to meet third world ones in the middle at the cost of first-world middle class, then there is a big problem. See where Trump and Sanders got most of their votes and you will start to see a pattern here.

Because the USD is the world reserve currency.

That's why.

That might explain the USA, but it doesn't explain Canada, Europe, Australasia and Japan.

I'll admit that I don't understand French social security well at all, but based on what I've read online it seems like increasing salaries would actually reduce the amount of money going to social security because that would mean lower profits for employers (who contribute a higher percentage of their income). Obviously, in terms of wealth redistribution, it's better to have higher wages. But increasing them would actually hurt the social security system.

"that would mean lower profits for employers (who contribute a higher percentage of their income)"

No, for equivalent 'net money on your wallet after tax' a company pay more tax for employees than for company owner.

Without detailling too much (and by choosing an 'arbitrary but realistic situation') the are two ways of getting money from your company to your personal bank account :

- a specialy taxed "company owner" salary (you can make simulation here : https://mon-entreprise.urssaf.fr/simulateurs/eurl , yes I choose a specific company category, but it's a common one, you can compare with a the 'standard' employee tax numbers : https://entreprise.pole-emploi.fr/cout-salarie/ ) which give you benefit from the social security system and which cost a bit less (for a standard company owner range of pay) than an employee salary.

- A 'company profit share' at the end of each year. You 'decide' how much you company profit was this year and that you want to give to owner, you pay a "less important tax than on salaries" give it to the owner, and then they pay their personnal income tax on it.

The optimisation game is to ensure yourself a sufficient salary to have a good social protection (and other perk like being abble to rent/buy/loan money easily) but also benefit from company income share wich is less taxed.

I dont even talk about legal trick to avoid parts of the company income tax, wich is way more complex to handle than a salary.

Cool, thanks for the links!

basically you pay a % of your salary to the pension fund. the higher the salary the more money you pour into. yes it will reduce profits for employers but even that is only short term. if salary rise you are more competitive on the global talent pool and you can do like america where a big chunk of today s giant were built by highly educated immigrants that came mostly because of the high salaries

With inflation at the level that it is, everyone will end up with minimum salary anyway, so what's the point?

no. inflation is really good in an economy where salaries rise. its good to borrow money, its good for the working population (the one that makes the country thrive) and it is less good for retired people (that already own wealth and lived through better economic times)

In France think about it, the majority of the working population voted for Marine LePen, the majority of retired people voted for Macron, Young non working people voted for Melenchon. Hence why macron needs to satisfy his base, old people that retired early and now wants us to work more so that they can enjoy more their stress free life while everything is more expensive for the rest of us.

I think you'll find French pensions do not rise to keep pace with inflation. And especially not "promised" pensions, you know yours or mine, the pension for people still working.

yes they did rise this year linked to inflation while at the same time gov insisted for not raising salaries

As I said they did not rise to keep pace with inflation. Which means they got closer to the minimum. The minimum, btw, also dropped, expressed in real goods.

The system ISN'T sustained, not even the most optimistic scenario supports your argument.

And funneling even more money into it like you want to isn't an option, the GDP proportion dedicated to retirement increased a lot already.

You've seen the low salary but you didn't understand the cause of that, the cause of that is the money is being funneled to the retirement system.

Literally everything you said is false.

The COR (Conseil d'orientation des retraites) has 4 working scenarios and only a single one of them has the retirement system going temporarily into the negatives. The situation is not alarming at all. In addition, there are a lot of solutions that have been on the table to help the retirement system do even better and allow people to retire earlier (for example paying women the same as men: the salary resulting increase will mechanically make more money go towards contributing to retirement funds).

If the GDP portion dedicated to the elderly is maintained at around 14% the system has nothing to worry about, the goal of Macron's reform is to lower this number because he prefers to use public money to fund private companies that are already making profits (through tax mechanism such as the CICE or the CIR for example).

Also, low salaries actually means less money "funneled to the retirement system", since this money is a percentage of salaries. Also, low retirements income means people still working have to financially support their parents. The elderly have to be supported one way or another. The question is whether you choose to do it collectively as a society, or go with the individualistic solution that won't work for everyone.

Every single scenario in the COR is negative for a long time, people should stop lying about it to comfort their political leanings. And it's not like it's for short time either, the worst scenario has a negative forecast for the next 45 years. The figures are terrible, regardless of your opinion.

Secondly, 14% of GDP is massive, workers have been paying more and more towards the retirement system, salaries did increase a lot already, it's just that all of the increase went towards retirement

> The elderly have to be supported one way or another.

Nice way to avoid the fact that France spends a lot of money towards high retirement salaries which don't need it. Additionally low salaries live less longer, making the system even more injust.

The way to fix it and transform it into a social system is to tax the high retirements for the benefit of the workers. In a social system the money should go towards the people who need it the most and not the opposite, France's retirement system isn't a social system anymore.

The president of the COR itself disagrees with you: https://www.francetvinfo.fr/economie/retraite/reforme-des-re...

> 14% of GDP is massive

That's very subjective, and even someone agreeing to call it "massive" could not necessarily see a problem with that, if we can afford it (which it seems, we can).

> Additionally low salaries live less longer, making the system even more injust.

That's a good point. And the reform Macron is trying to pass will make this even worse: low salaries live less longer and are already dead or in very bad health by the time they can retire (and a big part cannot even work up to that age). Making the minimum retirement age two years later will greatly increase this injustice: most low salaries will contribute their whole life to pay for the pensions of the richer who actually still have living time in good health after they retire.

Concerning the high retirement salaries and the necessity to tax them more, I mostly agree. But that's not at all what Macron's reform is about.

> The president of the COR itself disagrees with you: https://www.francetvinfo.fr/economie/retraite/reforme-des-re...

No, they do agree with me, read it yourself again, in the most optimistic scenario, France needs to wait until 2045 (!!) for the deficit to be reduced. That's terrible in itself, and that's the most optimistic scenario as well... What I would consider reasonable is a few years of deficit, not from 20 up to 50 years.

> That's very subjective, and even someone agreeing to call it "massive" could not necessarily see a problem with that, if we can afford it (which it seems, we can).

You can't complain of stagnating salaries if you are okay with increasing the share of workers salaries going towards retirement. "we can afford it" doesn't seem to be the opinion of the people concerned paying it.

> Concerning the high retirement salaries and the necessity to tax them more, I mostly agree. But that's not at all what Macron's reform is about.

Let's not pretend like anybody else is proposing this solution either.

> "we can afford it" doesn't seem to be the opinion of the people concerned paying it.

Then how do you explains the massive strikes and demonstration? Do you think these millions of people and the millions more that support them are all dumb?

> Let's not pretend like anybody else is proposing this solution either.

Politics don't for obvious electoralistic reasons, but the idea is at least discussed in some unions.

> Then how do you explains the massive strikes and demonstration? Do you think these millions of people and the millions more that support them are all dumb?

Not many people understand how the retirement system works in France and its direct impact on salaries. It's not the simplest retirement model either and people don't take the time understand it.

> Politics don't for obvious electoralistic reasons, but the idea is at least discussed in some unions.

Sure but then what's the point? There's much more people retired than people working, the democratic system is broken.

> Not many people understand how the retirement system works in France and its direct impact on salaries. It's not the simplest retirement model either and people don't take the time understand it.

Why would you bother to understand it? It will have changed, and be much worse, by the time you retire. The state is, of course, counting on people misunderstanding the fact that there is not a single guarantee you get paying into this system, as nothing stops politicians from changing it.

And, as you point out, plenty of factors force, to a lesser or greater extent politicians into making the system worse.

So why bother understanding it? France is like most European nations: either you own a comfortable home + some supplemental income by the time you retire or you're f*cked.

(source: my dad was a teacher (in a neighboring country with a very similar system), and is now on the pensioner side of this system. He is single-digit percentage points above the minimum, despite his ability to show a contract, with the government, stating explicitly, in 3 languages, that he's guaranteed at least 40% above minimum. But, you see, "a decree goes above contracts". The state cannot, and will not uphold it's promises made under this system, so it doesn't matter. They just want you to work your ass of, and pay taxes correctly to extract maximum work from you while not upholding their end)

why not? we have 98% of GDP debt and we kept funneling money into this debt. why suddenly the pension funds are the problem?

it states that in 10 years there will be 20 billion deficit , that doesn’t include the raise of salaries to match inflation (it was removed in france in 1983) I ll wonder what would be the numbers if we do this simulation but pretty sure it will be positive.

Finally, 20 billions is nothing for france, we spend 40 billions on immigration so by your logic we should just stop pouring money and lock our country?

Isn't there other priorities in France than funneling more and more money in the retirement system so that wealthy old people can enjoy their boat cruise? Is that really the top priority right now?

You have to realize that debt and GDP spending are competing with each other.

> the system IS sustained

regardless of whether this is correct or not (difficult to predict the future, even the COR only has "scenarios" to talk about, but nobody knows really what will happen), the current system is unjust in many ways (some "special regimes" are super favorable, with little justification other than legacy, and some workers should have more favorable regimes because of their work conditions, yet they do not and the reform does nothing for these people).

>it is nothing else than a betrayal at the highest level of the state

Agreed. Still, this is less worse (I can't really say "better") than the first attempt at reform during Macron's first mandate: that first attempt included a contribution rate falling from 28% to 2.8% above 120Keuro/year (if I recall correctly), which was effectively a tax cut for the wealthy.. If anything above this threshold, the contribution rate should increase (i.e. be progressive instead of regressive). The main issue is that the whole thing is un-reformable because so many consistuencies have vested interest in the status quo.

You can’t increase salaries de jure and even if it were possible, it’s not clear how the governor of the ECB would be able to pass laws.

> You can’t increase salaries de jure

The law defines the minimum legal wage. History has shown that increasing the minimum wage generally quickly end up increasing all salaries.

History has also shown that it leads to higher unemployment and lower growth of the salaries above it.

History hasn’t really shown anything.

"european commission non elected leaders"

French government is not elected either. Like all European countries, by the way.

How's the European Commission not elected? You vote a government in your country and they than select the commissioner for this commission.

That's indirect at best. The government also decides who it sends as ambassadors to foreign countries, but would you say that ambassadors are elected?

As far as I know ambassador have a total different role compared to the European Commission.

They sure do, but that's not the point I'm trying to make. We tend to call someone that is elected by the people 'elected'. Someone who gets decided on by these elected representatives we call appointed, they don't inherit the 'elected' attribute. If they did, essentially all political officers (e.g. high level workers in a government department) would be elected, because they were chosen by elected officials.

US supreme court judges get nominated and confirmed. The president is elected (well, kind of, but most agree that he/she is elected by the people even though the electoral college is mixed in there) and then nominates a judge and the Senate confirms the nomination. I don't think it's common to call the supreme court judges 'elected' though, despite their selection by two elected parties.

Indeed. The Commission is appointed by the Council (member state govt heads of state) and appointments are ratified by the European Parliament. Same as with the executive in the US. Not complicated.

Euhm. Sort-of. The commission is appointed by country governments (specifically by the minister of foreign affairs). That minister is appointed by a government, which tends to be a coalition government, chosen by the head of the executive, that then has to be ratified by a majority of the national parliament of the country. An appointment to the commission remains valid until their term runs out, no matter what happens to the government that placed them there.

So it's EU commissar (appointed) -> Foreign Minister of member country (appointed) -> Coalition government (appointed) -> Head of the executive of member country (ie. the king, in most cases) -> Parliament of member country (elected)

Certain member countries don't have very stable coalitions, which means there's always a few EU commissars that don't have the support of their host governments. This is especially true now that Christian parties are in the process of being voted into irrelevancy in a lot of countries (unfortunately to be replaced by rightist and in some cases extreme-right parties)

So, what you said. With one very important difference: there isn't one level of indirection, there's at least 4 or 5 levels of indirection. It isn't very democratic, especially since EU law means these people have law-giving power, power to override the parliaments of member countries (that would be why Christine Lagarde proposed using that power to freeze wages)

Every single pension system has the working population pay for the retirees. Where do you think the money comes from? Thin air? Any increase in the value of pension funds (for example) is coming from the workers.

> Every single pension system has the working population pay for the retirees.

Which is just a socialized form of the previous social security system which had children or grandchildren look after their parents. Of course, the glaring difference is that social security schemes have motivated many millions, who otherwise might have, to not have children at all or an inadequate number and so contribute very little to nothing towards the future maintenance of the system while still cashing the checks once they retire. Of course this system does help the minority who can't have children for whatever reason but it does look like we've swapped looking after that cohort for a few decades for effectively no social security system for anyone once this ponzi scheme collapses.

>Of course, the glaring difference is that social security schemes have motivated many millions, who otherwise might have, to not have children at all or an inadequate number

This implied link between public pensions and demographic collapse paints a picture that social security was destined to fail because people wouldn't have children for the purpose of taking care of them in old age. The millennial generation, the largest American generational cohort, were born almost 50 years after the founding of social security. How does it make sense that public pensions motivated millennials to not have children, but not their parents?

Across all developed countries where you have demographic collapse you have societies where it becomes more and more expensive to raise children. The public pension system requires that the economy grows year after year and that becomes hard when your population shrinks. As to why the population is shrinking you have to look at why people aren't having children. And when you ask that question you get way more "I can't even afford to buy a house" and not "the government is going to take care of me when I'm old".

To prepare for retirement, you have two options:

1. Have children and treat them well. 2. Save and invest, so capital is available for the few children of the next generation to work with.

As long as millennials are doing option 2. there isn't a problem. If they rely on the pension system, then that would be a problem.

That’s a pretty crazy position. In the US, there’s lots of material out there on the conditions that led to the creation of Social Security and subsequent legislation like Medicare and Medicaid. Hopefully you are simply ignorant of that history and not demonstrating a blase tolerance of human suffering.

These systems are very sustainable, and the solution to the funding issues would be best served by indexing the cutoff for contributions to inflation.

As to birth rates, how do you expect people earning less than their parents to absorb the exponentially higher costs? My son was born over a decade ago. Thanks to a moderate, common complication, his birth cost $85k. His childcare at age 3 cost as much as our mortgage.

I think the parent comment is being overly reductive for rhetorical effect, but not necessarily wrong. At the end of the day, social security programs are an abstraction across the demographics of working people vs non-working people. And you only get more working people by giving birth to them.

All the retirement savings won't make a difference if there is no one to spend them on. If the population is expected to decline, then you better hope your retirement investments are going into technology that can yield sufficient future productivity gains.

It's apparent if you just think about the farm labor required to produce food, which can't be stored as easily and long term as money. (On that note, maybe the best retirement strategy is a whole bunch of kerosene and shelf stable foods...)

Edit: As said elsewhere in the thread, I fully agree that the problem is due to children being too expensive, not that people just expect the government to take care of them.

> the solution to the funding issues would be best served by indexing the cutoff for contributions to inflation.

Social Security caps are indexed to inflation (they went up 9% from 2022 to 2023): https://www.ssa.gov/benefits/retirement/planner/maxtax.html

I assume you're a software developer in the US. Doesn't your awesome insurance mean that you are out of pocket just a few thousand dollars?

Even if so, that money was paid by the premiums of all the other people in the plan. The point is that having children is simply too expensive, partly due to cost disease in healthcare.

Your insurance most certainly didn't pay out 85K. They have negotiated lower rates which are not transparent to us. Source - my own kids deliveries were billed 40-50K. We paid at most a few hundred.

I'm not sure where this thought comes from - on our explanation of benefits there's always a line item for how much they negotiated down and it usually never amounts to much.

Insurance profit margins are pretty tiny. We (or our employers) pay a ton for insurance because healthcare costs are beyond ridiculous in our country.

Are you trying to say US healthcare isn't expensive? What is the financial risk of having a child who needs insulin?

> Are you trying to say US healthcare isn't expensive?

I am only arguing with "The point is that having children is simply too expensive, partly due to cost disease in healthcare." Typically, the main cost of having children involves preschool childcare and good colleges.

> What is the financial risk of having a child who needs insulin?

How many children need insulin? Again, I only contend with the broad generalization that having children is expensive due to healthcare costs.

The money is just an entry in the accounting ledger allocating society's labor. The pension fund can increase to trillions and quadrillions, and it will not make a difference if there is not enough people willing to change bedpans for as low of a price as was originally expected.

Yes, they can play with inflation and debt, but at the end of the day, it's just a question of people resource and time allocation. Money is just a proxy.

There will be a market clearing price for that work, and these accounting mechanizations are simply sussing out what that price is (in comparison to other broad societal work to be done).

If caring for the elderly is made more valuable than say, slinging JavaScript, that’s where some of the labor will go.

Sure, but the fact that your savings or pension plan contributions "should have" been enough for a certain amount of care can't guarantee that it will be enough for all or even half of it when the time comes; it's perfectly plausible (and with certain worker/retiree ratios even inevitable) that the market clearing prices will have to be higher than what would be enough for most people.

And the key factor is that if everyone (or their government) saved twice as much, that wouldn't help because if the worker/retiree ratios are the same, then twice as much retirement savings should simply lead to a twice higher market clearing price for that work due to "these accounting mechanizations".

>then twice as much retirement savings should simply lead to a twice higher market clearing price for that work due to "these accounting mechanizations".

You assume:

* The labor market isn't flexible, that higher pay won't attract new workers

* There isn't a wage at which workers would be satisfied meeting their basic needs.

And this makes your conclusion that the labor would simply absorb additional funding too rigid.

> * The labor market isn't flexible, that higher pay won't attract new workers

Why yes, looking from a whole market macroeconomic perspective, we should assume that the labor market won't magically generate an arbitrary number of new workers just because the pay is higher - the total number of potential workers is set by demographics and cannot rapidly adjust due to market pressure. The pay rate does affect the labor participation rate, but there isn't that much room for maneuver there, the changes in proportion of workers-to-retirees are much larger than what you can fill with non-working potential workers.

Well, one way that does get new workers is massive immigration of working-age people (which is the strategy used, perhaps unintentionally, by some countries), but if their birth rate and life expectancy is similar, that only postpones the issue until those immigrants themselves reach non-working age.

> Every single pension system has the working population pay for the retirees.

Nope. At least not completely. Canada switched away from a pure pay-as-you-go (PAYG) system in the 1990s:

> Move towards a hybrid structure to take advantage of investment earnings on accumulated assets. Instead of a "pay-as-you-go" structure, the CPP is expected to be 20 per cent funded by 2014, such funding ratio to constantly increase thereafter towards 30 per cent by 2075 (that is, the CPP Reserve Fund will equal 30 per cent of the "liabilities" - or accrued pension obligations).

* https://en.wikipedia.org/wiki/Canada_Pension_Plan#1996_refor...

Asset returns are used to help fund benefits. A number of pension funds in Canada have moved away from a (pure) PAYG model:

* https://en.wikipedia.org/wiki/Pensions_in_Canada#Canada_Mode...

PAYGO vs investment earnings is purely a financial construct.

The central issue is that physical goods and services need to be produced around the time that they're consumed, and at a given point in time, an economy has a fixed capacity to generate these goods and services.

If you have a non-producing population, and a producing population, then the only way for the non-producing population to consume a given quantity of goods and services is for the producing population to not consume those goods and services. Whether you call the reduction in consumption ability of the working population "taxes" or "investments" doesn't change this fundamental fact, except insofar as it alters certain behavioral incentives around deferring consumption and legal frameworks around property rights.

(This isn't 100% of the story, since you can "lay claim" to production of working people overseas via international investment, but is accurate in broad strokes.)

Since you said capacity is fixed _at a given point in time_, this is technically true but not really useful.

Populating aging happens over time, not all at once. Overall production also changes over time. It’s not inherently true that for “non-producing” (not sure exactly how you’d define that) people to consume goods the “producing” people must consume less, at least not relative to past levels of consumption.

You're right, it's not necessarily true relative to past levels of consumption. But there's a limit to economic growth, and the choice of "paygo" vs "investment" probably only has marginal effects on the rate of economic growth, so the point stands.

"Non-producing" people are retirees (as well as children). People who don't produce market goods/services that make up the vast bulk of our material needs.

> If you have a non-producing population, and a producing population

Isn't this true of capitalism generally, and not just for retirees and young workers?

The "non-producing population" is commonly called "capital", and the "producing population" is commonly called "labor".

On a macroeconomic scale it is still the workers paying for the retirees. Doesn't matter how many millions you have in the bank if there aren't working people you can trade your money for goods and services with.

I think a lot of people assume that pension systems ought to or actually do work as savings/investment systems, like private 401(k)s do. So you pay into the system when you're working age, your money is saved, then it is paid out to you later.

I'm not sure about every pension system, but there are many that invest in government bonds. The problem what that approach is the sustainability of the system depends entirely upon interest rates, which have been at all time lows for the past 15 years. Some private pensions invest in the broader market.

All investment systems suffer from this exact problem: returns aren't guaranteed. Even people with 401ks might experience this same issue if investment returns fall below the conventional wisdom rate of ~7% (or 4% real). But even if that rate holds up over the long-term, there's still to risk of a "lost decade" of no-returns or losses for and extended period, followed by a sudden market pop.

Pensions are hard.

"there are many that invest in government bonds"

If a government "invests" in its own bonds, that's not an investment.

Many government pensions invest in other governments' bonds.

They were working great until the looting started.

After seeing the pensioners in my home country living in poverty because of economic crisis destroying their pensions, the government using pension money as if it was its own, and being actively hostile to pensioners by delaying trials to pay the pension money fairly waiting for them to die, I will take a 401(k) over that always, my money is mine and no one else's.

Argentinian? The government theft of the private funds was outrageous. Although the AFJPs were far from being a 401(k) system.

> Argentinian

Takes one to know one

Money is never truly yours if you are not the issuer. That's why we need more "hard" money (gold, bitcoin).

Bitcoin is hard money? If it is, so is silly putty :-)))

I have some bad news for you then: many of the companies that provide 401(k) were on the verge of collapse in 2008. The only reason people didn't lose their pensions entirely was because the government bailed them out...

You can always lose your money. Best to accept that and not worry too much.

> many of the companies that provide 401(k) were on the verge of collapse in 2008.

The stock market went to shit, not the providers. The 401k appeal is that it's an account you *own* and the government can't touch for money, it would be the same as expropriating a bank account, which to be fair, the Argentinian goverment kind of did in 2001, hence why since then, people there save money in usd cash or in a foreign account, not in the local financial system. If the US government has to expropriate or do weird stuff in general with 401k accounts, we are in a situation where shit hit the fan long ago.

Ask Cypriots about bank account haircuts :-)

I'm from Argentina, the government there did that before it was cool

The 401(k) money is held separately from the company funds.

How does that work? The 401(k) providers are lending out the securities that their customers own?

No, 401k admins do not own the securities, the employees do. The comment is incorrect in implying the government bailed out the administrators, but the government did backstop the price the securities (the stock market) itself.

Hence why I think an SP500 investment is risk free on a >3 year timeline.

"You can always lose your money."

It went somewhere.

Whose labor is giving those investments value? Who's doing the labor that gives those IOUs (dollars) value even if you just stick them in a savings account and don't invest them? It's not retirees.

All financial savings are an illusion. They are just claims on productivity of other people in the future.

Boomer generation globally accumulated a lot of claims and considered them their "wealth" but forgot to produce enough people that are going to be willing to put an effort to satisfy these claims.

Now is the time when boomers will want to use their savings and discover their error.

> I think a lot of people assume that pension systems ought to or actually do work as savings/investment systems, like private 401(k)s do.

It works more like a Ponzi scheme.

And it wasn't a problem when the working age population was always increasing... but when it no longer is (as is the case in much of Europe) it becomes problematic.

> when it no longer is (as is the case in much of Europe) it becomes problematic.

Not necessarily. What matters here is whether production matches demand. If the proportion of people in the workforce declines, but their productivity increases by the same amount (which isn't far from being the case in Europe) you don't have a problem.

And even that is too simple. As the population ages, demand changes. It increases im certain domains (health) so productivity increase might not suffice.

...but then of course the productivity of older people declines too, together with their health (higher unemployment, more sick leaves), so there is a lower and lower ROI as you put these people in the workforce. And then making people work longer accelerates the health decline, and so increases the demand. Except those people die younger on average, lowering the demand.

So it's a supply and demand issue, but not quite a supply and demand of workers. It's a complicated economic problem. All of this is talked about in the French debate, which is a lot more subtle than the loud vociferations reported in the news make it out to be.

Europe can also benefit from immigration. One advantage of immigration is that immigrants do not have to grow up to be productive.

In Australia, it is a mix. Most people should have a self-funded retirement as a result of mandatory superannuation during their working life. Those who haven't accrued enough can fall back on the aged pension, but this should become less and less common (mandatory super was only introduced in the 90s).

As they should. Everyone needs skin in the game.

China's building massive amounts of underused housing. US boomers could have built long-lived buildings and infrastructure (high-speed trains) which provide usefulness to people later in exchange for them paying some money for retirees.

Instead, they built ever-decaying roads and rotting ticky-tacky boxes and left nothing durable for future generations. Hell, they even ripped out trains in cities across the country. (Seattle interurban among so many examples).

China is what the US used to be. Even Charlie Munger said that they are displaying more mercantile behaviour whereas the US is being protectionist and enforcing non-trade based policies across the globe.

Construction quality in China is generally bad, especially in lower tier cities. Those buildings and infrastructure aren't going to last.

Wasn't the Seattle interurban torn up in the early 1940s? I don't think you can blame that on the boomers.

That's probably correct. Burke Gilman trail ripped out tracks in the 70s though.

> Every single pension system has the working population pay for the retirees. Where do you think the money comes from?

Disagree.

Counter-examples:

401k in the US

Second pillar in Switzerland.

The money comes from the people saving and investing their own money for their old age.

Shocker, I know.

Ok but indirectly it's still the same. Once you reach the retirement age, interest/dividend and capital increase are "paid" by younger generation. If at retirement age you were to have no interest/dividend/capital increase you are going to have a very small pension, especially if inflation kick-in.

it is a common misconception that how the retirement is funded makes a huge difference in how much you need to save. In most situations, it does not matter nearly as much as people believe. Dependency ratio will determine in large part how much people will need to save to get a given level of retirement income.

For example, your 401k ability to pay for your retirement will depend on productivity gains , growth, saving, investments happen in the future. Those will look very different if you have 4 working age people for one non working person, vs 2 working age people for one non working one. In the extreme case, if nobody is working anymore when you retire, your 401k will likely worth almost nothing.

The problem in France is not how it s funded, but the fact that retirement incomes are way above the funding level. France, with Italy, are the only two OECD countries where retirees have a higher income that working people, which is insane. However, since retirees vote much more than other demographics, their too large income will not be touched.

In Italy, the retirement age was raised to 67 in 2011. However, in some cases, it is still possible to retire earlier, but the amount you receive will be proportionally adjusted based on your remaining life expectancy.

This change in retirement age only partially applies to those who started working before 1995. Therefore, it is still in a transition phase, and it will take some time before it takes full effect.

Those are not pensions. The 401k system is explicitly an alternative to the older pension systems. Words mean things.

but these are pensions, more specifically they are supplemental pensions on top of the basic one like US social security, or France's basic pension from SS (which is supplemented by "complementary pension" from other regimes like AGIRC/ARRCO).

You utterly missed my point. You say people invest money. Aren't they expecting a return? Where does that return come from? If there is no return on investment, are we really talking about a pension, or just saving up for late age unemployment?

Corporations extract value from countries in the form of labor and resources. It's in their best interest to pay for pensions to sustain the populace.

Isn't the UK using pension funds?

It is (so is the US). But ultimately productive value from workers must be transferred to retired people. How exactly that happens, whether through deferred spending power (ie savings/investments) or through direct payments, it has to happen.

Although I admit that there being other countries in the world does change the calculus a bit; it would be possible (albeit weird and unsustainable) for everyone in France to be retired, so long as say the Philippines was young and working and French retirees owned all the shares in Philippine companies.

"From workers to retired people" implies at a casual reading that the worker and the retiree are not the same person, when in many systems the majority of what the worker pays goes directly to their own retirement.

It's debatable whether paying into your own account is a transfer of wealth at all, even if you're not able to withdraw your money until retirement.

You're still relying on money being worth something in future.

Imagine a future where there are half as many the workers as retirees. It doesn't matter how much money retirees have in their pensions if they cannot hire workers to look after them (do their healthcare, produce the food they eat etc). You'd just get rampant inflation as the richer retirees competed to get workers, and everyone else goes without. In other words, in that scenario the value of the saved money would be eroded by inflation.

Now I will admit that this is complicated by there being other countries, or if we invent humanoid healthcare robots or whatever. But there's a principle involved that someone (/ thing) has to do the work.

>You're still relying on money being worth something in future.

Yes, and that's why this basic pension can only be something guaranteed by the state. In case of war or massive devaluation or change or currency, the state (maybe not even the same one under which "rights" were acquired) can guarantee these things (and will want to guarantee them, in order to preserve the pensioners from poverty).

It's still all a clever scheme around the young looking after the old, numbers in an account wouldn't help us if everyone stopped having children today.

> it would be possible (albeit weird and unsustainable) for everyone in France to be retired, so long as say the Philippines was young and working and French retirees owned all the shares in Philippine companies

That is basically the same situation, but you are replacing local people that see the retired ones with remote people that can refuse to send any money and won't even see old people starving.

A strong military can make the situation more sustainable, in a highly immoral way. But that again isn't new, you can enslave people near you too.

The main difference is that in the pension fund model, you (at least in theory) don't need the next generation to pay: you save now so you get money later.

In the more common model, you pay for the previous generation hoping that the next one will pay for you, and you need intergenerational agreement on what's a fair amount. You don't need that with the fund model, as you (usually) agree & know beforehand how much you'll pay and how much you'll get.

I'm fortunate to not be part of it, but I'm pretty sure German employees are looking at France where rents are higher and retirement age is lower and think "hey, you can do that?". I guess we'll see whether you can (though, fair enough, Germany is a special case, the reunification cost a lot of money).

> you save now so you get money later.

How do you save labor for later? Current retirees need young folks to do the work they cannot do, and thus those young folks are paying in today.

When those young folks retire they will be relying on even younger folks to do the work for them. If there are not enough younger folks to do that work, the money saved between generations will become relatively worthless.

Thought another way: The same amount of labor needs doing. If the current generation of workers stops paying in (read: working), then the entire system stops. One generation saving more (or being larger) than the next doesn't change much other than that saved wealth chases a decreasing amount of available labor once that generation retires. Quality of living will be predicated on the amount of available labor - not saved capital.

It gets a little more wishy washy when you can plow capital into long-lasting infrastructure, international wage arbitrage, etc. but in the end you simply cannot run retirement systems if you have less labor available while keeping the same quality of life for all parties. Someone is going to lose.

How exactly does the same amount of labor need doing when there will fewer people who need anything in the near future? You seem to be saying more labor per person is necessary to satisfy this “need.”

That doesn’t seem beneficial to workers as a whole. I thought innovation was supposed to benefit everyone? Where’s the hole in this logic?

When the current crop of retirees were in peak earning periods, there were something around 6-8 workers per retiree. Data on France isn't super easy to come by.

By 2030 this is expected to be about 2, which is better than I expected. You would need massive productivity gains inside the span of the past 40 years to make up 4-6 workers per retiree in labor.

The fact I have 4-6 less cousins my age to sell my labor to to help take care of grandma doesn't seem to offset that huge amount of labor now needed to be expended on largely unproductive tasks. We went from 4-6 people pitching in to help out grandma each day to just myself. If you look at that in hours vs. dollars, the problem starts to become quite apparent to me. I don't feel I'm 500% more efficient at what I do than my elders.

Perhaps we've innovated so well that we can now support old folks with a fraction of the labor, but I'm skeptical. Fixed costs seem rather fixed, and from where I'm sitting I think a whole lot of that "innovation budget" has been spent already on rising expectations of minimum quality of living.

Compared to productive workers, retirees will need less of some things and more of others. In particular demand for healthcare is increasing. Expect most countries to increasingly ration healthcare, especially for elderly people.

One of the biggest changes in coming decades culturally might be how long are we ready to prolong life of average person. Rich can afford it on their own, but same doesn't apply to you normal pensioner.

I think you missed the finer point that GP made: At the end of the day, somebody has to change that bedsheet.

Consider this extreme edge case: If everybody is retired and no is is working, inflation goes to infinity and all those savings and stocks become worthless.

For sure, but there's a difference between a promise that someone will do it for you, and you having currency to exchange for doing so.

In the "having money" case, you have more options, but if you're given options, you also have more opportunity to make terrible decisions. And if it's a lump sum (or private investment of some kind), you can pass it on to your children - you can't do that with pensions in the other type.

What is currency if not an implied promise that someone will provide future services or goods in exchange for it? In a situation where workers can't/won't keep a promise to maintain retirees, the currency value will reflect exactly that, it will devalue so that the total amount of currency retirees have won't be enough to buy these services.

Yes, but we'll quickly spiral into infinity if we take it too far. For our intents and purposes, currency is a placeholder for value. If you have that value (whether actually material or represented by currency), you'll have a much better chance to find someone who will exchange it for services. Their incentive is getting something from you in exchange.

On the other hand, in the current system as it's used in France, Germany etc, their incentive is that hopefully someone else will do it for them in 40 years. But from what I gather, very few members of GenZ believe that our pension system will survive in its current form until it's their turn to benefit from it. They expect it to collapse, so everything they'd now put in would be wasted, much like if you invest in something after it has signaled that it will default soon.

The french pension reform attempts have been going on for decades ... Every president, be they socialist or liberal, have attempted to tackle the issue, only to get country-paralyzing backlash.... it isn't a sustainable system.

Good For them?

They've been trying to change this forty years? So they were trying to change this back when it ipso facto was sustainable, since it's survived 'till now. How credible does that make the current effort.

Certainly, America has changed a bunch of supposedly "unsustainable" things into ... utter misery for the average person.

Awkwardly that same logic applied to global warming would not work out well. Under the rug is not a solution unfortunately.

So?

Do you have any argument that these two questions should be approached the same way?

> Every president, be they socialist or liberal, have attempted to tackle the issue, only to get country-paralyzing backlash. People will nitpick the details of whatever current plan proposes, but the fundamental problem remains.

The Touraine Law in 2014 raised the number of worked years from 36 to 43, which is a big deal. So it's not like nothing happened. Also there are good reasons to dispute the current proposal, it's not just nitpicking details, it will impact very negatively some people and perhaps there are other ways to fix the system.

Indeed even here in the comments everybody gets heated about the details, so on the streets it will be even worse. What everybody (how conveniently for them) ignores is why, when this pension was invented, did they choose a certain age when to benefit from it. They chosen it by age expectation, that not everybody gets to reach it so the survivors will benefit. Nowadays this very principle is broken and we all get hung on 63 or 65 while the average/median/whatever live over 70. So basically everybody requests and expects a pension which wasn't even thought for everybody. It's not the system's fault here - it wasn't designed for today's pyramid - but I also recognize you cannot expect people to accept that, so here we are.

> The Touraine Law in 2014 raised the number of worked years from 36 to 43, which is a big deal.

that's right, and what's so surprising (to me) today is that the Touraine law got enacted without much protest, while what's happening today is taking the same terms for retirement and extending them to younger generations (i.e. those born between 1960 and 1973) is causing protests. The current proposed reform looks like a big deal, but the bigger deal happened in 2014 and was barely noticed (because the lawmakers were careful enough to put it far enough in the future...).

French here:

Though the problem is well known (at least for 40 years), No french governments has considered diversifying the source of the revenue funding the pension system. Actually its worse as the only capitalisation existing are in a process to be nationalised.

Moreover, this reform is purely the outcome of political game. Macron electorat is mainly the 'boomers' who fully beneficiated of th situation ( in fact their pension are impacted despite having higher wealth than the majority of the workers).

I personally would consider a reform only if there an effort requested for everyone.

As a French, I have absolutely no trust in the government to manage my pension. And no desire to hand them that power either.

But as usual they'll fight tooth and nail to keep their monopoly, as they like us to depend on them as much as possible.

Vote with your feet (i.e: walk away from it all), it's the only option.

Yes, that's what I've done for about a decade now, and apparently more and more people do as well (abstention is record high).

The thing is I distrust big corporations almost as much as I distrust big government, but at least, it's easier to move to a different company when one of them really sucks, provided there's a bit of competition.

With governments, there's no such thing, you're stuck with them for 5 years, and their power only keeps growing.

The French gov, like most others, basically only seeks more money and power over society. Whatever the ruling party.

> With governments, there's no such thing, you're stuck with them for 5 years

There are many other countries on Earth.

Many of them measurably better than France on very many dimensions.

Go give them your hard earned tax money instead of wasting it on a lost cause.

What I personally did but very hard to convince others to follow that way...

what is the cause of not having enough funds to maintain the current retirement age?

The current system requires more workers ( with decent salary) than number of retirers... Given the population if getting older this creates an a very prévisible imbalance...

there are enough. there are using statistical models to predict that we wont have enough in the coming decades.

a biased model that is financed by private pension funds and led by mckinsey… I have a very simple way to make enough funds to maintain current retirement age : increase our salaries. france income per capita is the same for the past 20 years, if you raise salaries it will raise how much money goes to pension funds. problem solved

Increasing salaries will increase the cost of goods and services, meaning that more savings are required. It doesn't necessarily balance.

your made in china tv or your fruits or even cars made in morroco will be greatly impacted by a raise in french salaries. butter in france rised 50% thanks to energy war. one can argue raising salaries will never reach that level of crazy.

And where does the money for raising salaries come from?

Same reason as most other countries - reversal or population age pyramid because they’re of baby boomers generation being more populous than younger ones. Soon there will be more retired baby boomers than gen X and millennials working so there will be less money going in to pension funds than going out.

it isn't a sustainable system.

This is wrong. We have an institute that has one mission. Evaluate its sustainibility, and it disagrees with you.

We should make a list of organizations that have one mission and fail in that mission. It would take much time.

Well the irony is that our french government is precisely relying on one cherry picked scenario of this organization to justify it's reform...

So it's why polls quite unanimously report that 70% of the population is opposed of this reform on a quite developer friendly axiom : "When it ain't broken don't try fix it!"

Bonus fun fact 1 : Even with the cherry picked scenario of our gov the system might be in slight imbalance starting 2027 while it's currently balanced. To put this in perspective 10 years ago the same organisation predicted a great imbalance for today.

Bonus fun fact 2 : The 70% rejection poll is an average. One of the only group that is less rejecting the reform consist of already retired people. There is a growing resentment against baby boomers in the xyz generation.

That is not correct. Have a look at this 20mn interview: https://www.youtube.com/watch?v=ngnxmampNBM

In other news, lawyers say you need a lawyer, plumbers say you need a plumber, etc.

Not a single pension program on earth is sustainable - including the US' Social Security System. All of them are political 3rd rails and kill careers of anyone seeking to do meaningful reform.

Why did we get to a situation where the government is in charge of safeguarding your retirement and wellbeing? It's insane... we should compel people to have IRA's or some sort of retirement account, but the money needs to be under the control of the person it belongs to.

Good. Seems they’re going to have to confront the failure of the system. Better than digging a deeper hole.

Parent comment is just wrong. The COR (Conseil d'Orientation des Retraites, meaning advisory board on retirement to the French Prime Minister) says this clearly: the current system is sustainable and does not need to be reformed. https://www.cor-retraites.fr/node/595. Or in video here: https://www.youtube.com/watch?v=GsL1wT8jxVU (subs auto-translated to English are available).

> France's system has the working population pay for the pension on the retirees, as a social security tax. With the retirement age around 62-65, with the lifespan increasing, and with the Baby Boomers retiring, it isn't a sustainable system.

It can be sustainable, even at comprable rates, especially with fewer younger workers if wages are allowed to increase to meet labor demand.

baby boomers aren't retiring, they're dying. The pension system has already been through its worst period and managed to not get too badly hurt.

I really don't understand this reform. However for me to understand it, one would need an 8 hour video stream full of spreadsheet with an actual expert working on that reform.

And no media is ready to do that

I'm not sure where your facts (or opinions) are from.

There is a coming wave of retirees, and an associated decrease in the workers per retiree to support them.

https://www.ssa.gov/OACT/tr/2022/

See page 12, page 15.

If you both are not understanding the issue, and not interested in learning about the details, then maybe you shouldn't take a strong opinion on the matter.

baby boomers are people born between 1945 and 1960. Meaning people between 63 and 78 yo. All of them are already retired, and the oldest ones are starting to die.

https://www.populationpyramid.net/france/2022/ doesn't look like it. The bulk of population just started going through the retirement age. Click -5 6 times, then start clicking +5 and watch how it moves.

the bump between 2017 and 2022 is mostly around the 75 yo slice. That's the beginning of baby boomer generation. Meaning this generation has been retired for more than 10 years now.

It's going to be 10 more rough years, until 2032, and then the shape stabilizes. Changing the age from 62 to 64 won't change anything to this generation impact on the system.

Now is the 2032 shape sustainable with the current retirement age ? that's another question, but it's not a matter of protecting against the baby boomer impact.

Who says its not a sustainable system? That is really just a popular assumption. The system is working well at this point with enough headroom. Lobbygroups from the EU and large institutions are pledging for this change. There is not enough workforce according to them. Their profits are endangered. Nobody from those entities are looking at the well being of the citizens.

> Who says its not a sustainable system?

The fact that it’s running out of money

It does not.

̶F̶r̶a̶n̶c̶e̶ ̶h̶a̶s̶ ̶c̶o̶n̶t̶r̶o̶l̶ ̶o̶f̶ ̶i̶t̶s̶ ̶c̶u̶r̶r̶e̶n̶c̶y̶.̶ ̶T̶h̶e̶ ̶p̶e̶n̶s̶i̶o̶n̶ ̶s̶y̶s̶t̶e̶m̶ ̶d̶o̶e̶s̶ ̶n̶o̶t̶ ̶n̶e̶e̶d̶ ̶t̶o̶ ̶b̶e̶ ̶p̶a̶i̶d̶ ̶b̶y̶ ̶t̶a̶x̶e̶s̶ ̶o̶n̶ ̶w̶o̶r̶k̶i̶n̶g̶ ̶p̶e̶o̶p̶l̶e̶.̶

Oops I forgot about the Euro. Oh well, so much for sovereignty.

If they print more money to meet their pension obligations, that causes inflation which quickly erodes the value of the payments.

So, printing money to meet pension obligations has a similar effect to reducing the amount which is paid out.

Also, I don't think many people accept Francs as currency anymore.

> that causes inflation which quickly erodes the value of the payment

Pension payments cover basic subsistence-level costs for goods that can be mitigated by supply-side production and productivity increases. Claiming that they cause inflation is just rebranded austerity politics. Inflation is caused by fraudulent debt-relief for "businesses" like we saw with PPP and low interest rates that create asset price and shitcoin bubbles.

> Inflation is caused by fraudulent debt-relief for "businesses"

Sure? Tell that to Argentina, Venezuela, Zimbawe and Turkey.

I don't know why someone downvoted you, as you are right. But it seems that gigaton of useless little pieces of paper called pesos with which that the governments has flooded the economy since decades has nothing to do with out inflation problems.

nope it is not the same outcome. one sacrify the working class and the current generation that went through multiple economic crisis and a horrible housing market while the other sacrifies boomers that lived through full employment and the golden age of france economy. I ve made my choice.

> France has control of its currency

No it does not. It uses the Euro, which technically requires it to maintain a balance.

if only it had control of its currency! The way out of this previously was to devaluate currency so that the face amounts of pension stay the same but purchasing power decreases (in other words, it decreases the value of pension in a much less visible way, and done over many years is like a slow boil).

Honest question: is that the case? I thought the Euro adoption meant they couldn't print currency with the same freedoms that say the US or UK could.

You are correct and Euro comes with restrictions on creating currency for macroeconomic reasons. This was in the limelight during the 2008-2012 Greek debt crisis, and also came up around that time for other EU countries (Spain and Portugal at least). Additionally, Iceland, which does not use the Euro, had at one time pegged their króna to the Euro which caused issues in the 2008-2012 time period (though as I recall the main problem had to do with some other nation taking a major Icelandic bank into receivership post-2007 collapse).

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